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Insurer should set an example

Ian King: Business Editor’s Commentary

March 26 2014, 12:01am, The Times

In January 2011, after deciding that the market lacked effective competition on price, the Office of Fair Trading urged companies and institutional shareholders to exert greater pressure on underwriting fees.

The rights issue unveiled yesterday by RSA suggests that, if any pressure was exerted, it has been to little avail. Of the £773 million the beleaguered insurer is raising, £25 million will stick to the advisers’ fingers, more than 3 per cent.

This is excessive when the new shares are being sold at only 56p, a whopping 40 per cent discount to Monday night’s closing price and a 32.7 per cent discount to the theoretical ex-rights price (terp). At such a deep discount, little risk is being assumed by the underwriters.